How to File For Bankruptcy in Canada: A Step-by-Step Guide

Going through financial distress can be a daunting experience. In Canada, bankruptcy offers a legal way out for individuals grappling with overwhelming debt. This article will take you through a step-by-step guide on how to file for bankruptcy in Canada.

Understanding Bankruptcy

Before diving into the process, it’s essential to understand what bankruptcy is. Bankruptcy is a legal process that provides relief to individuals who cannot pay their debts. It’s governed by the Bankruptcy and Insolvency Act in Canada and is administered by Licensed Insolvency Trustees (LITs).

Assessing Your Financial Situation: Do You Need to File Bankruptcy?

The first step is to evaluate your financial circumstances. Is declaring bankruptcy the best course of action?

Signs You Might Need to Declare Bankruptcy

Here are some indications that bankruptcy might be your best option:

  • Missed mortgage or loan payments
  • Using credit card advances to pay bills
  • Receiving threatening calls from collection agencies
  • Notice of legal action against you for debt collection

If these situations sound familiar, you might need to explore debt relief options, including bankruptcy.

Seeking Professional Advice: Contact a Licensed Insolvency Trustee

Once you’ve assessed your financial situation, seek advice from a professional. In Canada, only a Licensed Insolvency Trustee (LIT) is authorized to administer insolvency proceedings. They can halt ongoing and pending legal and collection actions, including lawsuits and wage garnishments.

Filing the Paperwork

If bankruptcy is your chosen path, your LIT will assist you in completing the necessary paperwork. These include:

  • The “Assignment” document, which declares that your LIT is taking control of your assets for your creditors’ benefit.
  • A “Statement of Affairs” that lists your assets, liabilities, income, and expenses.

You will also need to provide supporting documents like tax returns, proof of income and expenses, and proof of any owned assets.

Meeting Bankruptcy Commitments

During the bankruptcy process, you’ll be required to meet specific commitments:

  • Counselling: Your LIT will provide you with budgeting and money management counselling.
  • Reports: You’ll need to file monthly reports on your income and expenses.
  • Payments: You may have to pay for equity in assets, surplus income, and administrative costs.
  • Taxes: Your LIT will file your personal income tax return for the year of bankruptcy.

Completing the Process: Discharge from Bankruptcy

After fulfilling your duties, you’ll be eligible for discharge. This release frees you from the obligation to pay the debts you had at the time you declared bankruptcy.

Moving On: Rebuilding Your Credit Score

With your debts discharged, you can start rebuilding your credit score. Your LIT will guide you through this process during your mandatory counselling sessions.


Declaring bankruptcy is a significant decision, but it can provide relief for those who are overwhelmed by debt. If you’re considering this option, it’s crucial to seek advice from a professional LIT and understand each step of the process.

Remember, bankruptcy is just one possible debt solution. Your LIT can explain the merits and outcomes of various options available to you, helping you choose the best way forward for your unique situation.


Here are some common questions about filing for bankruptcy in Canada:

Remember, it’s always important to consult a professional for advice tailored to your specific situation.

Additional Resources

For more information about filing for bankruptcy in Canada, visit the Government of Canada website or consult with a Licensed Insolvency Trustee.

Find Your Personal Debt Relief Solution

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